Italy Axes F-35 Stealth Fighter and Olympic Bid in Austerity Drive

Italy will cut orders for the American-built F-35 fighter jet and scrap its 2020 Olympic bid as part of the country's austerity drive, government officials said Wednesday.

The cuts were announced as it emerged the Italian economy shrank by 0.7 percent in the fourth quarter of 2011, following a contraction of 0.2 percent in the third quarter.

Italian Defense Minister Giampaolo Di Paola said Italy would reduce its order for Lockheed Martin F-35s from 131 to 90 as part of an overall reduction in military spending

He said that 183,000 military and 30,000 civilian personnel, who currently account for 70 percent of the nation's military expenditures, will also be progressively cut by 20 percent.

The F-35 was revised like all the other weapons programs, Di Paola said after a Cabinet meeting that approved the military spending plan.

He added Italy will close or sell 30 percent of its logistical bases and regional headquarters over about five years, and the navy will reduce its fleet of patrol boats to 10 from 18, and submarines to 4 from 6, Di Paola said. He gave no overall savings estimate.

The defense cuts were announced the same day that Italy refused to guarantee funding for Rome's bid to host the 2020 Olympic Games.

The turbulence of the financial markets doesn't allow us to ignore the difficult financial situation of the country, Italian technocrat Prime Minister Mario Monti said in reference to the decision not to back the Olympic bid.

Olympic games are indeed an indulgence Rome simply cannot afford. But cuts in defense and military are a different matter entirely.

In 2002 Italy said it would order 131 supersonic warplanes by 2018, but since the start of 2012 Di Paola has repeatedly said he was reviewing the program as part of Monti's austerity plan to shore up public accounts.

Shares in Italy's state-owned defense company Finmeccanica fell more than 2.3 percent after Di Paola announced the cuts.

Finmeccanica's Alenia unit, a subcontractor on the F-35 project, will assemble the planes purchased by Italy, the Netherlands and Norway.

News of Italian defense cuts follows the Pentagon's own postponed orders for 179 F-35 Joint Strike Fighters over the next five years in a measure expected to save about $15.1 billion.

It is the third restructuring by the United States in recent years of the F-35 project, which is its biggest current weapons program.

The slowdown in production will lead to an overall higher average cost for the fighters, Tom Burbage, head of Lockheed Martin's F-35 programme, said in Norway on Tuesday.